Are Naked Shorts A Thing Of The Past?

Rocktober 19, 2023

* currencies drift lower on Wednesday

* Ahem, Janet, we can’t afford to buy a candy bar! 

Good Day… And a Tub Thumpin’ Thursday to one and all! The entire family, sans two, went to dinner last night together at the local Malt Shop… As you may recall, I gave up sweets over 3 years ago, but I couldn’t resist my fave shake… A Banana Shake! Man, was that yummy! I wasn’t sure how my stomach would react to it, but I did it anyway! I said to myself, “Chuck, you’ve never been someone that stops eating or drinking something because of your cancer” let the chips fall where they will, is my attitude… And I won! my stomach did not revolt and I had a decent night’s sleep! The band, Jet, greets me this morning with their song: Are You Gonna Be My Girl?
Well, after the better-than-expected Retail Sales on Tuesday, the dollar traders/ bugs, piled into the dollar again, and the BBDXY gained 5 index points yesterday… All the currencies were affected by the dollar’s rise. What took traders so long before diving into the dollar again? I guess they wanted to look under some hoods… No, wait! That’s what I do, Traders never, ever look under hoods! I mentioned yesterday, that the POTUS going to Israel had calmed the markets… Hmmm…. Nothing like not seeing that you’ll be disappointed by the outcome, eh?  Oh well, it is what it is… Gold started the day yesterday up a whopping $48, and ended the day up $24.40 to a price of $1,947.90, which was $16 off its high for the day, and Silver did the same thing, giving back a majority of its gains, to end up .02-cents, which was 50-cents off its high, and a price of $22.91…
The dastardly short paper traders just couldn’t leave Gold & Silver alone for the day, and they were responsible for the metals giving back some of thier gains during the day yesterday… 
The big mover yesterday was the yield on the 10-year Treasury, which saw a rist to 4.95%! It came from 4.85% early in the morning… The rout on Treasuries, is major folks… I read where some of the issues sold before yields began to rise were now selling at 50-cents on the dollar… If stocks had a drop like that it would be considered to be in collapse! You can’t sell you previously issued bonds now… It’s sort of like the lyrics to Hotel California… you can check out anytime you like, but you can never leave…. At least you’ll get your principal back at maturity, if you can hang on that long, that is… 
The price of Oil remained trading with an $88 handle yesterday… A BIG move from $83 last week, before the Israel/ Hamas conflict, but now appears to be stuck in the mud… 
In the overnight markets last night…. There was little to no movement in the dollar, with the BBDXY up just 1/3rd of an index point… The price of Gold is up $4 to start the day today, nothing like yesterday’s moon shot to start the day, but up nonetheless… Silver is flat to down some pennies to start the day today… And wouldn’t you know, I just wrote about how the price of Oil seemed to stuck in the mud, when I look at the overnight prices, Oil has dropped a buck to start the day trading with an $87 handle… UGH!  And the 10-year, added another bip to its yield overnight, and starts today with a 4.96% yield… Inching, closer to 5%… inch by inch, as the saying goes… 
The markets are on the edges of their seats today, waiting for Fed/ Cabal/ Cartel chairman, Jerome Powell to speak… Yesterday, Fed Head Waller painted a dovish picture for interest rates…  It should be noted that Waller, had been thought to be a Hawk, so his dovish position was strange… I kind of think the Powell will trump Waller this morning, and talk about the need for one more rate hike, coming in December… And that won’t be good for Gold, but then maybe Powell will surprise us today and turn into a dove…  stranger things have happened, right? 
And the Bank of Japan (BOJ) watchers are talking about another round of intervention that may be coming from the BOJ… I say, “Why waste the money?, the last bout of intervention lasted about 2 days, and then then the yen was right back to getting sold…”    Remember when I used to tell you that the markets have more cash than a Central Bank?  Well, that’s still plays, especially here… 
So, does everyone know who Robert Prechter is? He’s the genius behind Elliot Wave, you know the charts people that tell you something’s going to happen long before it does? Well, I was reading a blip by Doug Casey, and he mentioned that Robert Prechter is calling for a massive selloff of stocks…  Uh-Oh…  but when people get tired of waiting for stocks to come back, they’ll hopefully turn to Gold, something stable, and something that will keep up with inflation, unlike what they’ve been holding…  So, there you have it straight from the horse’s mouth! 
You know me, I’m not even your last pick when it comes to being a stock jockey, but I learned something many years ago, and that was to follow the Elliot Wave charts…. 
Ok, you know me, and I don’t believe the Gov’t should spend 1 penny more than they receive in Taxes… And while the Gov’t DOES spend more than it takes in, yearly, which is why the national Debt is $33 Trillion, and climbing higher and higher with each year’s deficit spending… So, when I hear the U.S. Treasury Secretary, Janet Yellen talking about what we can afford, it made the hair on the back of my neck stand up… Here’s the skinny on what I’m talking about: “US Secretary of the Treasury Janet Yellen stated in an interview that “America can certainly afford to stand with Israel and to support Israel’s military needs and we also can and must support Ukraine in its struggle against Russia.”
Ok, so she thinks we can afford to support both Israel and Ukraine?  Maybe Janet needs to go back to elementary school and learn some ‘rithmatic! We as a Country are already on pace to have a $2.0 Trillion deficit in the fiscal year that started not that long ago… So, I guess what she’s saying is: “We’re already at $2 Trillion, why not make it $2.1 or 2.2 Trillion? What the diff? 
Ahhh, Janet, tell me you have forgotten how the U.S. finances its deficit spending, because, otherwise, you’d be worried about the addition bonds that would have to be sold to cover that increased debt… Bonds that apparently countries all over the world are rejecting at auctions… 
SERENITY NOW!  As Popeye used to say, “I’ve had all I can stands, and I can’t stands no more”! I either need to quit writing, so it doesn’t upset me so much, or… move to an island country that doesn’t have internet! 
The U.S. Data Cupboard yesterday had the Fed’s Beige Book, and in it…. The U.S. economy exhibited “stable” to “slightly weaker” growth in the early fall, a Federal Reserve survey found, helping to loosen up a tight labor market and ease inflation…  And the Fed Head who spoke yesterday, Waller, told his audience that he preferred the Fed Heads wait on any new rate hikes…   So, the doves got a double dose of ammo for their thoughts that the Fed was finished with their rate hike cycle… 
To recap… The dollar selling ended yesterday, with the dollar bugs diving right back into the dollar, driving the BBDXY up 5 index points on the day… The dollar strength affected all the currencies, so none were spared… Gold had to give back about 1/ 2 of its early morning gain yesterday, but did gain $24.40, While Silver eked out a 2-cents gain… The Big mover yesterday, was the yield in the 10-year Treasury, as it grows ever so close to 5%… And Janet Yellen thinks we can afford to support both Israel and Ukraine… Chuck thinks she needs to go back to elementary school for some ‘rithmatic lessons! 
For What It’s Worth… The link to this article was sent to me from the good folks at GATA… It’s about a ruling that could have an affect on naked short positions in metals, and it can be found here: Is This The End Of Naked Short Selling? |
Or, here’s your snippet: “American investors have been taken for a trillion-dollar ride by naked short sellers, in what could turn out to be the biggest financial regulatory scandal in North American history.

While what is now an all-out war on naked short sellers intensifies, there is a new flashpoint on the front line–a potentially devastating ruling targeting those who are alleged to make illegal naked short selling possible: The Facilitators: bankers and brokers.
On September 29, Federal District Court Judge Lorna Schofield of the Southern District of New York issued a ruling that has the potential to significantly disrupt Wall Street compliance, and is a major first step towards protecting retail investors from fraud.
In Harrington Global Opportunity Fund Ltd. v. CIBC World Markets, Inc, Judge Schofield found that broker-dealers may be primarily liable for manipulative trading initiated by their customers because they serve as “gate-keepers” of trading on securities exchanges.

These broker-dealers have a “continuing responsibility to ensure that their customer’s order flow … is in compliance with all applicable rules, regulations and laws and detect and prevent manipulative or fraudulent trading … under the supervision and control of the firm,” the judge ruled.

When things get naked, the regulatory environment becomes riddled with compliance holes. With a naked short, the short seller is selling shares it doesn’t own and has made no arrangements to buy. That means the seller cannot cover or “settle” in this instance. More profoundly, it means they are selling ghost shares that simply do not exist without their further action. The ability to sell an unlimited number of non-existent shares in a publicly-traded company gives a short seller the ultimate power: To destroy and manipulate a company’s share price at will.  

Following the 2008/2009 financial crisis, naked short selling was classified as illegal in the United States, though that labeling has done nothing to thwart this lucrative game.

What makes the September ruling so impactful is this: Without the big banks and financial institutions’ complicity, this highly destructive form of naked short selling could never happen.”

Chuck Again… Well, we certainly have seen more short paper trading since the ruling took place… Are the price manipulators, saying neener, neener, neener to the Judge and the ruling?  I do believe they are… stay tuned for more on this story in the future… 
Market Prices 10/19/2023: American Style: A$ .6311, kiwi .5825, C$ .7285, euro 1.0555, sterling 1.2122, Swiss $1.1140, European Style: rand 19.0262, krone 11.0392, SEK 11.0262, forint 364.06, zloty 4.2201, koruna 23.4033, RUB 97.28, yen 149.82, sing 1.3735, HKD 7.8253, INR 83.24, China 7.3159, peso 18.32, BRL 5.0571, BBDXY 1,275.60, Dollar Index 106.47, Oil $87.30, 10-year 4.96%, Silver $22.90, Platinum $883.00, Palladium $1,103.00, Copper $3.59, and Gold… $1,951.26
That’s it for today… A BIG weekend for my beloved Mizzou Tigers coming up… On Saturday night, I will be in attendance for the last regular season game for my StL City Team… that is as long as it’s not going to rain… I will have just gotten over a bug, and don’t want to catch another one! My immune system is shot… After years of chemo, I could walk past someone with a cold, and tomorrow I’d be sneezing… Later this year, in July, Kathy and I are headed to Ireland! with a side trip to Oslo Norway… I’m very excited about this, but need to temper my excitement, because it’s still 255 days away! We just finalized everything, so now we wait for July! I sure hope my body has gotten used to the new chemo soon… And on that note, Sugar Ray takes us to the finish line today with their song: Every Morning…  I hope you have a Tub Thumpin’ Thursday today, and a Fantastico Friday tomorrow, Let’s go Tigers! And please remember to Be Good To Yourself!
Chuck Butler